What Happened?

Shares of semiconductor design software provider Cadence Design Systems (NASDAQ:CDNS) fell 11.7% in the morning session after the company reported underwhelming fourth-quarter 2024 results as its full-year revenue and EPS guidance were both below expectations. On the other hand, revenue was in line, and EPS beat. However, the top line guidance revealed a growth deceleration, which is worrisome. Overall, this was a weaker quarter, and the outlook is weighing on shares.

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What The Market Is Telling Us

Cadence’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. Moves this big are rare for Cadence and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 4 months ago when the stock gained 13.1% on the news that the company reported impressive third-quarter earnings that blew past analysts' revenue and billings expectations. The strength was broad-based on strong double-digit sales growth recorded in the System Design & Analysis and IP segments. The Q4 bookings pipeline was described by management as “exceptionally strong”, suggesting a healthy rebound in the company's backlog. This was a very good quarter.

Cadence is down 9.2% since the beginning of the year, and at $270.23 per share, it is trading 17.2% below its 52-week high of $326.50 from June 2024. Investors who bought $1,000 worth of Cadence’s shares 5 years ago would now be looking at an investment worth $3,377.

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